Everyone who moves into an aged care home negotiates a room price before moving in. Whether you are then required to pay this price will depend on your means assessment.
Whether you’re eligible for government assistance or not, there are different options available for how to pay your accommodation costs in an aged care home.
It is recommended that you seek independent financial advice to decide which payment option works best for you.
Negotiating a room price
Prices vary from one provider to the next. Your room price will depend on:
The type of room you choose
Aged care homes may set their room prices depending on:
- whether it’s a single or shared room, or if it has a shared bathroom or ensuite
- the size of the room
- the geographical location of the aged care home.
While there is flexibility in how you pay for your accommodation, it’s still important to choose a room within your budget.
Some providers may offer different accommodation options depending on what you can afford.
You can find and compare room costs using the Find a provider tool.
Your price negotiations
Aged care homes are required to publish their maximum accommodation costs for their various rooms on this website. You and your provider can negotiate and agree on a lower price. However, you cannot be charged more than the published price for that room.
The maximum amount a provider can charge for a room or part of a room is $550,000 (or the equivalent daily payment), unless they have a current approval to charge more.
Providers can be granted approval from the Independent Health and Aged Care Pricing Authority to charge over $550,000 for certain room types.
Read more about what to consider when shortlisting aged care homes—including location, type of room, and price negotiation on our Connecting with aged care homes page.
What are my payment options?
You don’t have to pay the full cost of your accommodation upfront. You have three options as to how you can pay:
1. A refundable lump sum
There are two types of lump sum, depending on the outcome of your means assessment:
- Refundable accommodation deposit (RAD): This is when you pay the full amount yourself. It is the accommodation price you agreed on with your provider.
- Refundable accommodation contribution (RAC): This is when the government helps with the costs. It is worked out by your provider based on the daily accommodation contribution (DAC) determined by Services Australia (see below).
If you choose to pay an amount as a lump sum, the balance is refunded when you leave the aged care home. Any amounts that you have drawn down from the lump sum to pay other aged care costs will not be refunded.
Read more about aged care home accommodation refunds.
2. Daily payments
There are two types of daily payments, depending on the outcome of your means assessment:
- Daily accommodation payment (DAP): This is when you pay the full amount yourself. It is the accommodation price you agreed on with your provider.
- Daily accommodation contribution (DAC): This is when the government helps with the costs. The amount is determined by Services Australia based on your means assessment.
Daily payments work like rent payments – they are not refunded when you leave care.
3. A combination of refundable lump sum and daily payments
This is when you combine the two types of payments to meet your costs. You can split the combination any way you choose.
For example, for an agreed room price of $400,000, you could choose to pay $100,000 as a refundable lump sum, and also pay a reduced non-refundable daily payment.
You have 28 days from the day you move in to decide how you would like to structure your payments. Until you decide how to pay for your accommodation, you will need to pay by non-refundable daily payments.
If you choose to pay by lump sum within this timeframe, your provider must give you at least six months from your date of entry to pay the lump sum.
You can also choose to pay a lump sum later at any time while you are in care, or pay more towards a part lump sum.
I’ve chosen a lump sum – what does this mean for me?
If you decide to pay by lump sum for part or all of your accommodation, you may have the option to draw down on your lump sum to meet some of your other aged care costs. It is recommended that you seek independent financial advice to decide if this option will meet your financial needs.
If you request it, your provider must allow you to draw down on your lump sum to pay any remaining accommodation costs.
- I have paid a part RAD
You can draw down a daily accommodation payment (DAP) from your refundable accommodation deposit (RAD) balance to meet your accommodation costs.
- I have paid a part RAC
You can draw down a daily accommodation contribution (DAC) from your refundable accommodation contribution (RAC) balance to meet your accommodation costs.
What happens if my lump sum is reduced due to drawing down?
If this happens, your provider can request that you maintain the agreed accommodation payment. If they do, you can choose to:
- pay additional or higher DAPs or DACs (due to your lump sum becoming smaller)
- top up your lump sum, or
- do a combination of both.
Can I use my lump sum to pay my other aged care fees?
Yes. Your provider may also agree to let you draw other aged care fees from your RAD or RAC balance, such as your basic daily fee or your means tested care fee. It is your provider’s decision whether they choose to allow this.
Can paying a lump sum affect my other aged care fees?
Yes, it can. The balance of an accommodation lump sum is counted as an asset in the aged care means assessment. This means it is considered when working out your means tested care fee and/or accommodation contribution.
However, an accommodation lump sum is exempt from the age pension means test.
It is recommended that you seek independent financial advice to understand if paying a lump sum works best for you.
Can my family give me money to pay for my accommodation?
The Aged Care Act 1997 does not prevent a family member from paying part or all of your accommodation costs. However, any lump sum payment made by the family will be counted as your asset for aged care purposes. This means it may affect your means tested care fee or accommodation contribution.
It is recommended that you seek independent financial advice to understand if this option works best for you.
It is also recommended that you seek independent legal advice before you enter into a loan agreement with a relative or friend. It is important to understand what this could mean for you and your family when you leave the aged care home.
If I pay by lump sum, what does it mean for my partner?
If you are a member of a couple, half the combined income and assets of both you and your partner are included in the means assessment. This happens regardless of who earns the income or whose name the asset is held in.
This means that if your partner is in aged care or planning to move into aged care, your paid lump sum may affect your partner’s means tested care fee or accommodation costs.
It is important that you seek independent financial advice to understand if paying a lump sum works best for you and your partner.
What if I’ve paid a lump sum and want some of it back?
Your provider is not obliged to refund lump sums while you remain in care, although they may choose to do so.
This means that if you want part of your lump sum back while you are in care, you will need to ask your provider if they will refund this amount to you.
I’ve chosen daily payments – how are my costs worked out?
How your daily payments are calculated depends on whether you are paying a daily accommodation payment (DAP) or daily accommodation contribution (DAC).
Daily accommodation payment (DAP)
If you choose to pay for your accommodation by DAP, the amount is worked out by applying the maximum permissible interest rate (MPIR) to your agreed room price and dividing the amount by 365.
If you agree to a room price of $500,000, your DAP will be worked out as follows:
DAP = (room price × MPIR) / 365
= ($500,000 × 8.15%) / 365
For the same room price of $500,000, you could choose to pay a part RAD of $200,000 and a DAP based on the remaining $300,000. For this combination payment, your reduced DAP would be worked out as follows:
Reduced DAP = ((agreed room price − RAD paid) × MPIR) / 365
= (($500,000 − $200,000) × 8.15%) / 365
= ($300,000 × 8.15%) / 365
Note: The MPIR used in example 1 and 2 (8.15%) is current as at 1 October 2023.
The MPIR that applies when working out your DAP is fixed at the date you agree to a room price with your provider. Increases or decreases to the MPIR that occur after this time will not affect the rate that applies to you.
If you have paid a part RAD, you can tell your provider to draw your reduced DAP amount from your paid RAD. Over time, this will make your lump sum smaller and your daily payment larger.
Daily accommodation contribution (DAC)
If you are eligible for government assistance with your accommodation costs, Services Australia will write to your provider to advise them of the DAC you are eligible to pay. This amount applies only if you choose to pay for your accommodation entirely by daily payments.
If you wish to pay part of your accommodation contribution as a lump sum (RAC), your provider will need to calculate a reduced DAC amount for you.
For example, if Services Australia advises that you are eligible to pay a DAC of $16.00 per day, and you choose to pay a part RAC of $20,000, your provider will work out your reduced DAC using this formula:
Reduced DAC = DAC advised by Services Australia – ((Balance of RAC paid x MPIR) / 365)
= $16.00 – (($20,000 × 8.15%) / 365)
Note: The MPIR used here (8.15%) is current as at 1 October 2023.
The MPIR that applies to you is set on your date of entry to care. Increases or decreases to the MPIR that occur after you have entered care will not affect the rate that applies to you.
You can tell your provider to draw your reduced DAC amount from your paid RAC. Over time, this will make your lump sum smaller and your DAC payment larger.
What is the maximum permissible interest rate (MPIR)?
The MPIR is a government-set interest rate used to calculate a daily accommodation payment based on your agreed room price. It is used to determine equivalence between a daily payment and a refundable lump sum deposit, giving you a choice in how to pay.
The MPIR is not an interest charge to residents who have not paid for their accommodation costs in full. It is set at a level to ensure that if you choose to pay daily payments rather than a lump sum, the daily payments are sufficient to cover the costs of providing accommodation in your aged care home.
You can find current and previous MPIRs on the Department of Health and Aged Care website.
Yes, you can. In fact, it is recommended. Some payment methods may affect your pension and aged care fees. Also, if both you and your partner need access to aged care, each of your payment methods may impact the other’s aged care fees. So, it’s beneficial to seek independent financial advice before deciding how to pay for your aged care.
Services Australia’s Financial Information Service (FIS) is a free service available to everyone. FIS officers can show you how to make informed financial decisions. They can also help you to understand the financial implications of your aged care costs.
To find out more about FIS, or to make an appointment, call 132 300 and say “Financial Information Service” when prompted.
For more information and guidance on financial matters, you can also visit our financial support and advice page.